FR 2024-31772

Summary of the Document

The document in question is a notice from the Securities and Exchange Commission (SEC) regarding a proposal by the Cboe C2 Exchange, Inc. The proposal aims to introduce a new fee, known as the CAT Fee 2025-1, which will be set at a rate of $0.000022 per executed equivalent share. This fee is associated with the costs involved in maintaining the Consolidated Audit Trail (CAT), which is a major system set up to monitor trading activity and ensure market transparency. The proposal was submitted to the SEC on December 20, 2024, and is designated for immediate implementation. The SEC has opened the floor for public comments on this rule change until January 27, 2025.

Significant Issues and Concerns

While the fee appears nominal at first glance, its cumulative impact over numerous transactions could be substantial. There is a concern about whether the fee structure adequately reflects the actual costs associated with maintaining the audit trail without unfairly burdening market participants.

The designation of the rule for immediate effectiveness may limit the time available for feedback from stakeholders and the public. This can be problematic because it may curtail a comprehensive evaluation of the implications. Additionally, the document lacks explicit criteria or a breakdown of what constitutes 'reasonably budgeted CAT costs,' potentially leading to ambiguity about the fee's justification.

The technical language and references to specific legislative sections may pose a barrier to understanding for those not well-versed in financial regulations. This complexity could hinder public engagement, as the average individual may find it challenging to discern the full implications and form a knowledgeable opinion.

Another concern is the accessibility of information, as individuals must navigate multiple URLs to access further details. This approach might disadvantage those with limited internet access or technical skills.

Impact on the Public and Stakeholders

For the general public, the CAT Fee 2025-1 may seem insignificant on its own, but individuals involved in trading or investing might perceive this as an additional cost, potentially influencing trading strategies or investment decisions.

Specific stakeholders, including market participants like brokers and trading firms, might face increased operational expenses due to this fee. Although designed to cover essential regulatory costs, the fee's introduction without a detailed justification for the expenses it intends to cover could raise transparency and accountability issues.

On a positive note, if the fee effectively funds the Consolidated Audit Trail, it could enhance market transparency and investor confidence by ensuring diligent monitoring and audit of trading activities. This transparency is critical for maintaining the integrity of financial markets and protecting investors.

Overall, while the proposal serves an essential regulatory function, it could benefit from clearer communication regarding the fee's rationale, cost structure, and potential impacts on market participants. This clarity would promote more informed public discourse and stakeholder engagement.

The document submitted to the Federal Register outlines a proposed rule change by the Cboe C2 Exchange, Inc. regarding fees associated with the Consolidated Audit Trail (CAT). This proposal has financial implications for industry members involved in the equities trading market and is intended to establish a new fee schedule.

Fee Structure

The proposal establishes a CAT Fee 2025-1 fee rate set at $0.000022 per executed equivalent share. This fee is intended to cover what are described as "reasonably budgeted CAT costs" associated with maintaining the National Market System Plan governing the Consolidated Audit Trail. However, there is no detailed breakdown provided in the document to explain precisely how these fees will be used to cover CAT costs, nor is there justification given to ensure the fee is appropriately balanced—neither excessive nor insufficient.

Financial Transparency and Justification

There is a notable issue concerning transparency in how these funds will be specifically allocated. The document lacks clarity on what constitutes "reasonably budgeted CAT costs," which leaves room for ambiguity regarding whether the proposed fee will adequately cover the necessary expenses linked to its intended purpose. Furthermore, the text does not mention how the fee revenue will be used beyond general coverage of CAT costs, leading to potential concerns over transparency and accountability in financial spending.

Public Participation and Complexity

Another significant aspect is that the proposed rule change is designated for immediate effectiveness, which suggests limited opportunity for stakeholder or public comment before the fee's implementation. This aspect could be seen as problematic as it reduces the potential for public participation in the decision-making process regarding financial obligations. The document also utilizes technical language, referencing specific legal sections and codes, which might present an additional barrier to understanding for those not familiar with financial regulatory terminology.

Accessibility of Information

The document refers readers to various URLs for further detailed information but does not provide a concise summary of the fee's purpose or impact directly within the notice. For individuals lacking easy internet access, this lack of immediate information could impede their ability to fully understand the financial implications of the proposed fee.

In summary, the financial references in the document indicate a new fee structure by Cboe C2 Exchange, Inc. proposed to cover CAT-related costs. However, there are areas where the document could improve in terms of clarity, justification, and transparency regarding how these fees will be allocated and spent, ensuring that they are both fair and understandable to all affected parties.